Quid Pro Quo? What Factors Influence IPO Allocations to Investors?

46 Pages Posted: 9 Mar 2017 Last revised: 5 Sep 2017

See all articles by Tim Jenkinson

Tim Jenkinson

University of Oxford - Said Business School; European Corporate Governance Institute (ECGI)

Howard Jones

University of Oxford, Saïd Business School

Felix Suntheim

International Monetary Fund (IMF) - Monetary and Capital Markets Department

Date Written: June 21, 2017

Abstract

With data from all the leading international investment banks on 220 IPOs raising $160bn, we test the determinants of IPO allocations. We compare investors’ IPO allocations with proxies for their information production during the bookbuilding and the broking (and other) revenues those investors generate for bookrunners. We find evidence consistent with information revelation theories. We also find strong support for the existence of a quid pro quo: broking revenues are a significant driver of investors’ IPO allocations and profits. The quid pro quo remains when we control for any unobserved investor characteristics and investor-bank relationships.

Keywords: Initial public offerings, allocations, conflicts of interest

JEL Classification: G30, G24

Suggested Citation

Jenkinson, Tim and Jones, Howard and Suntheim, Felix, Quid Pro Quo? What Factors Influence IPO Allocations to Investors? (June 21, 2017). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2785642 or http://dx.doi.org/10.2139/ssrn.2785642

Tim Jenkinson (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
United Kingdom
+44 1865 288916 (Phone)
+44 1865 288831 (Fax)

HOME PAGE: http://www.sbs.oxford.edu/timjenkinson

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Howard Jones

University of Oxford, Saïd Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

HOME PAGE: http://www.sbs.ox.ac.uk/research/people/Pages/HowardJones.aspx

Felix Suntheim

International Monetary Fund (IMF) - Monetary and Capital Markets Department ( email )

United States

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